On Friday, April 29, 2016, the U.S. Department of Justice (DOJ) announced Hollister Inc. and Byram Healthcare Centers Inc. have agreed to pay $20.9 million to resolve kickback allegations. The government alleged that Hollister, a manufacturer of health care products, paid kickbacks to Byram, a supplier of medical products, in order to encourage Byram to create promotional campaigns designed to refer patients to Hollister’s products. Kickback programs such as this scheme are prohibited under the Anti-Kickback Statute (AKS) and the False Claims Act (FCA).

According to Medicare regulations, the AKS and FCA are statutes “designed to prevent or ameliorate fraud, waste and abuse.” 42 C.F.R. § 422.504(h).

“Health care product manufacturers that financially reward suppliers in exchange for the referral of business can improperly direct patients to certain products over others,” said Phillip M. Coyne, Special Agent with the U.S. Department of Health and Human Services Office of Inspector General. Kickbacks create unfair competition in the medical market as honest manufactures are having to compete with manufactures who are paying for their business.

This type of competition clouds the judgment of medical care providers and corrupts the health care industry. According to the Centers for Medicare and Medicaid (CMS) Resource Guide, the AKS “prohibits the knowing and willful offer, payment, solicitation, or receipt of any remuneration, in cash or in kind, to induce or in return for referring an individual for the furnishing or arranging of any item or service for which payment may be made under a Federal health care program.”

In regard to the FCA, AKS violations are per se violations of the FCA. 42 U.S.C. § 1320(a)-7b(g). Moreover, “a person need not have actual knowledge of [the AKS] or specific intent to commit a violation.” 42 U.S.C. § 1320(a)-7b(h). Therefore, a provider can unknowingly violate the AKS and, consequently, the FCA.

In the case against Hollister and Byram, the government alleged that Hollister was inducing Byram to recommend Hollister products. These products, when sold to patients, were typically covered under Medicare or another state or federal health care program.

U.S. Attorney Carmen M. Ortiz stated, “These unlawful case incentives also threaten the integrity of the health care system and siphon taxpayer dollars from our nation’s health care programs.”

This case was filed under the qui tam provision of the FCA, which allows private individuals to file lawsuits on behalf of the government when those individuals have knowledge of a person or company defrauding the government. The FCA provides monetary incentives for these private individuals, known as whistleblowers, which include 15 to 30 percent of the damages recovered. The whistleblowers who brought the case against Hollister and Byram could receive up to $9 million as a reward for their part in the case.

Are you aware of fraud being committed against the federal government, or a state government? If so, the False Claims Act can protect and reward you for doing the right thing by reporting the fraud. If you have any questions about whether you qualify as a whistleblower, please contact an attorney at Beasley Allen for a free and confidential evaluation of your claim. There is a contact form on this website, or you may email one of the lawyers on our whistleblower litigation team: Archie Grubb, Larry Golston, Lance Gould or Andrew Brashier.

U.S. Department of Justice
Center for Medicare & Medicaid Services
42 U.S.C. § 1320(a)-7b
42 C.F.R. § 422.504(h)

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